There is good news and bad news for local homeowners. By “good news” I mean that we dodged a bullet. It’s not as bad as it might have been. Capital Gains Exemption, mortgage interest deduction, and property tax deduction were all on the chopping block. Here’s how it all came out…
Good News… Capital Gains exemption on the sale of a home was on the chopping block but it was rescued. You will continue to be able to exclude from Capital Gains $250,000 for individual or $500,000 for married couples.
Good News… Mortgage interest deduction was going to drop from $500,000 in the House version while the Senate version kept it at $1 million. We ended up with a bill both agreed on at $750,000. Not so bad. And, it looks like mortgage interest on Second homes might continue to be deductible. That would be very good news for the Newport Beach area with so many homes being vacation homes.
The Bad News… The news with the biggest financial impact on Newport Beach Homeowners is the cap on the deductions of Property Taxes and State Taxes. That deduction will cap at $10,000.
The Worse News… is if you plan on Selling your home in the near future. The cap on the Property Tax and State Taxes deduction is a financial hit for the high-end homeowners of our area. But the bigger impact is the effect it will have on the real estate market and home values moving forward. The cap of Property and State Tax deduction is enough to give Home Buyers pause in considering a home purchase. The increase in Buyer hesitation could cause some to rent until they figure out the impact of the new legislation. Others will have to reduce the price range of their home search. A recent Chapman University study estimates the impact on home prices in our area to be at a loss of 8-10%
Ok, back to Good News… Our Team is currently working on some creative strategies to make up for the lost Buyer incentive caused by these changes. We’ll be working with our Sellers to reduce the impact of Tax Reform on the sale of their home. If you’re planning on selling in 2018, call us for a consultation.
Keep a Watch on your home’s value as the market shifts.